Bloomberg News

Aussie Pares Gain as Stocks Fall Before Spanish Auction

April 19, 2012

The Australian and New Zealand dollars pared gains as Asian stocks fell before Spain sells debt today amid concern that Europe’s debt crisis is worsening.

New Zealand’s dollar traded 0.3 percent from a one-week low after data showed consumer prices increased in the first quarter by less than the central bank forecast, giving Governor Alan Bollard scope to hold interest rates at a record low. The nation’s two-year swap rate, a fixed payment made to receive floating rates, touched 2.895 percent, the least since Feb. 16. The South Pacific currencies gained as much as 0.3 percent earlier on speculation China will take further steps to support its economy.

“Concerns over European debt crisis may flare up again if the Spanish bond auctions go badly today,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services. “Currencies sensitive to stock moves such as the Aussie would be sold off in the face of rising risk aversion.”

The so-called Aussie dollar earlier reached $1.0388 before trading little changed from yesterday at $1.0360 as of 3:23 p.m. in Sydney. It rose 0.2 percent to 84.33 yen.

New Zealand’s dollar bought 81.67 U.S. cents from 81.59 yesterday, when it touched 81.46 cents, the weakest level since April 11. The kiwi added 0.3 percent to 66.47 yen.

Spain Auctions

The MSCI Asia Pacific Index (MXAP) of stocks declined as much as 0.4 percent following a 0.3 percent slide in the MSCI’s World Index yesterday.

Spain is scheduled to sell up to 2.5 billion euros ($3.28 billion) of bonds maturing in 2014 and 2022 today after data yesterday showed non-performing loans as a proportion of total lending jumped to the highest level since 1994.

New Zealand’s consumer prices climbed 0.5 percent from the fourth quarter, when they declined 0.3 percent, the government said in Wellington today. The result matched the median estimate in a Bloomberg News survey. Prices increased 1.6 percent in the year ended March 31, the slowest annual pace since September 2010.

“With consumer prices at these levels, it’s unlikely the Reserve Bank of New Zealand will increase interest rates any time soon,” said Ueda Harrow’s Yamauchi.

Consumer Prices

A Credit Suisse Group AG index based on swaps indicates the RBNZ will raise interest rates by 12 basis points, or 0.12 percentage point, over the next 12 months, compared with 36 basis points of increases indicated on March 21.

Australia’s government bonds advanced, sending the yield on the 10-year security down six basis points, or 0.06 percentage point, to 3.81 percent. Yields on the three-year government note fell three basis points to 3.23 percent.

China will boost liquidity by cutting the reserve requirement ratio if necessary, Xinhua News Agency said, citing an unidentified People’s Bank of China official. China may also increase open market operations including reverse repurchase agreements, redemption of central bank bills, according to the report. China is Australia’s biggest trading partner and New Zealand’s second-largest export market.

“We believe that an RRR cut will come soon,” Darius Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB, wrote in a note clients today. Media reports about the Chinese central bank add “to speculation of an imminent reduction of the RRR, which should be positive for sentiment.”

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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